Q1. Companies are often accused of being too keen to engage in creative accounting, especially earnings management.
- What do you understand by creative accounting and earnings management?
- Are these activities illegal or would attract attention of ASIC?
- Can you give examples of earnings management techniques and what they are trying to achieve?
- Be sure to notate balance sheet and income statement effects, or effects on financial ratios.
[You will need excellent knowledge of examples of earnings management techniques in accounting practice]
Q2. Measurement in accounting
- What do you see as the difference between the concepts of -aggregation- and -additivity-?
- Raymond Chambers was a critic of additivity last century and said: -if you add apple to a pear to an orange and get a donkey-, then everyone says that is ok and it is really nonsense.
- How did Chambers propose to fix things?
- How did Edward & Bell, the famous advocates of CCA propose to fix this issue of additivity as a phenomenon of modern-day Financial Reporting or not?
- What makes you comfortable or uncomfortable with it?
Q3. Conceptual Framework
- What is the definition of profit in your view?
- Can you write an equation or equations to characterise it?
- What is an asset and liabilities model of profit or income or expenses?
- Does the conceptual framework emphasize the assets and liabilities approach or a revenue less expenses approach?
[You will need your accounting algebra to effectively differentiate these approaches. Using your own numerical examples is a very good way to punch out an answer that means a lot.]